Talks have broken down between independent music labels and YouTube over licensing terms for its upcoming streaming music subscription service.

The Worldwide Independent Network (Win), which represents indie music labels, claims YouTube is approaching labels directly attempting to strong-arm them into non-negotiable contracts with the threat of being removed from YouTube.

Win claims the contracts undervalue the music of its labels in comparison to other music streaming services such as Spotify, Rdio and Deezer.

YouTube has already negotiated separate deals with the three major labels – Sony, Warner and Universal – according to Win.

'Unnecessary and indefensible'

“We believe that these actions are unnecessary and indefensible, not to mention commercially questionable and potentially damaging to YouTube itself, given the harm likely to result from this approach,” said Alison Wenham, chief executive of Win and chairman of the Association of Independent Music, UK, in a statement.

“Rather than moving from the 'disrupter' to the 'destroyer', the real challenge for Google should be to use its muscle to develop a disruptive remuneration system which recognises that 80% of all new releases, which are so important in YouTube's offer, are generated by independents,” Helen Smith, executive chairman of Impala said.

“For a company that has arranged its structure to pay minimal tax in our market, to now see YouTube's treatment of independent Australian labels who provide so much of its Australian music content so as to further improve their profitability at the sake of local content creators is deeply concerning,” said David Vodicka from AIR in Australia.

'A global mastodon like YouTube further undermining the value of music'

Others are worried that should labels give into the renumeration levels below current streaming standards, those could then become the standard and erode the independent music industry’s bottom line below sustainable levels.

“For a global mastodon like YouTube to further undermine the value of music to a level well below existing streaming services can spread like a virus and destroy the independent recording industry, labels and artists alike,” said Kristoffer Rom, co-chairman of DUP in Denmark.

“Spain's parliament is considering a law which begins to adapt copyright for creators to the new landscape. We couldn't hope for a better illustration of the problems that need solving than Google's behaviour at this negotiating table. It's a reminder that they need to be shown how not to be evil,” said Mark Kitkatt from UFI in Spain.

YouTube has allegedly not contacted independent labels in some countries, with representatives from Austria and Finland for example, reporting no negotiations with the Google-owned company.

YouTube is an important platform

Despite objections to YouTube’s negotiating tactics over the anticipated new streaming service, its current online video offering is an important platform for indie labels, helping musicians build their fanbases.

A panel of indie labels talking about how they break new artists at the industry conference Music Connected all agreed that YouTube as well as free music service SoundCloud, were crucial to their efforts.

"We’ve paid out to the music industry over the last several years over a billion dollars," vice president of YouTube content Tom Pickett said at the Midem music industry conference in February.

"YouTube provides a global platform for artists to connect with fans and generate revenue for their music," said a YouTube spokesperson in response to the Win statements. "We have successful deals in place with hundreds of independent and major labels around the world, however we don't comment on ongoing negotiations."